Toshiba has launched offers to buy out three of its listed subsidiaries as the lossmaking Japanese conglomerate seeks a definitive break from a 2016 crisis that brought it to the edge of collapse.
The company, which has shed 53 of its 350 subsidiaries in a crash diet of divestments over the past six months, said it would spend ¥200bn ($1.83bn) to take full ownership of the companies in which it holds significant stakes.
Nobuaki Kurumatani, the former banker appointed group chief executive in the wake of the company’s problems, linked the deals to governance, an area in which Toshiba faced severe criticism as it lurched from an accounting fraud scandal to the collapse of its nuclear business in the US and its demotion to the second tier of the Tokyo Stock Exchange.
“The issue of listed subsidiaries is a huge issue for corporate Japan’s governance problem,” he said on Wednesday.
Toshiba launched its tender offers for Toshiba Plant Systems & Services, NuFlare Technology and Nishishiba Electric with hefty premiums of 42, 50 and 60 per cent respectively on the averages of their share prices over the past three months.
Analysts said the generous-looking offers were probably an effort to avoid confrontation with increasingly vocal activist investors camped out on the shareholder registers of the three companies expecting an offer before the end of the year.
The move follows months of mounting pressure from Toshiba shareholders — whose ranks were suddenly joined by activist funds after the company rescued its balance sheet with an emergency issuance of $6bn of new shares in 2017.
“We are very happy with what they are doing. I think the independent directors are really doing their job,” said one Toshiba shareholder who has held the stock through the company’s crisis, referring to its new board where 10 out of 12 directors are independent.
An additional factor in the pressure on Toshiba has been the progress of its close rival Hitachi, another Japanese conglomerate that grew to a wildly ungovernable size and came close to collapse. Hitachi’s decade-long process of thinning itself down through sales or buyouts of listed subsidiaries is widely viewed as a model of how radically some Japanese companies need to pare themselves back to become competitive and profitable.
The most controversial element of Toshiba’s efforts to pull itself back from the brink during its crisis was the $18bn sale of its crown jewel memory chip business to a consortium led by Bain Capital.
Mr Kurumatani was grilled at Toshiba’s earnings presentation on Wednesday on whether it was really worth spending $2bn for three subsidiaries with only moderate growth potential.
He said the move improve would boost earnings per share by 21 per cent in the next financial year.
The acquisitions will also give Toshiba access to combined net cash of ¥150bn, money activists hope the Japanese group would use to launch a new buyback programme to follow its recently completed record ¥700bn scheme.
A year after Mr Kurumatani laid out the conglomerate’s new growth strategy, Toshiba continued to suffer, with a net loss of ¥5.5bn in the three months to the end of September because of a downturn in the memory chip business in which it still owns a stake.
But on an operating level the company reported a seven-fold increase in profits from a year earlier after it sold off many of its struggling divisions, including its overseas nuclear businesses and its US liquefied natural gas unit.
“We’re basically done with getting rid of our negative legacy,” Mr Kurumatani said. “I’m starting to feel confident about a V-shaped recovery.”